The knives are out -- and the media feeding frenzy is on -- for Steven A. Cohen and his $15 billion hedge fund, SAC Capital Advisors.

The firm last week told its investors in a letter that it no longer will cooperate unconditionally with federal investigators, and that the updates it provides about the progress of the government’s probe may be scant. The New York Times has reported that Cohen received a subpoena to testify before a grand jury.

There has been lots of speculation about what this means. SAC clients will have to make decisions about whether to keep their money there, even if the information available to them is imperfect. What does the future hold for Cohen individually? He may not know himself. One thing we can conclude: The government probably has enough evidence to indict SAC Capital or one of its subsidiaries already. The question of whether it should indict is another matter.

At least nine current or former SAC employees have been linked to insider trading while working at the firm, including four who have pleaded guilty to crimes, according to Bloomberg News’s tally. One was Jon Horvath, who admitted to passing illegal tips from insiders at Dell Inc. and Nvidia Corp. to his portfolio manager at SAC.

I’ll use his case to illustrate: On paper, Horvath’s offenses should be attributable to the firm. If prosecutors could prove to a jury that Horvath was guilty of the crimes to which he confessed -- and not just making stuff up under duress -- then the government should have a slam dunk. Of course, winning convictions in court is never quite this easy. Horvath’s credibility as a witness would be sure to come under attack by defense attorneys if SAC were ever put on trial.

This excerpt comes from the section of the U.S. Attorneys’ Manual having to do with prosecuting business organizations, and it explains SAC’s predicament well:

“A corporation may be held criminally liable for the illegal acts of its directors, officers, employees, and agents. To hold a corporation liable for these actions, the government must establish that the corporate agent’s actions (i) were within the scope of his duties and (ii) were intended, at least in part, to benefit the corporation.”

Based on Horvath’s admissions alone, the government probably could indict SAC Capital. Here’s what he said at his plea hearing when asked to describe his crimes:

“I was part of a group of analysts who agreed to obtain and share with each other information about various public companies. Some of the information that I obtained myself and received from other analysts was material nonpublic information."

He went on: “That information included information on Dell’s earnings which were announced in August 2008 and Nvidia’s earnings which were announced in May 2009, which I received before the public announcement of those earnings. In each of those cases, I provided the information to the portfolio manager I worked for and we executed trades in those stocks based on that information and before the announcement of these companies’ earnings."

He added: “I knew that what I was doing was wrong and illegal.”

Should the feds indict the firm? SAC employs about 1,000 people, and the potential for collateral damage would be a consideration, under Justice Department policies.

SAC probably isn’t a systemically important financial institution -- but even this question isn’t easy to answer.

Remember the hedge fund Long-Term Capital Management? It wound up getting a rescue by Wall Street banks in 1998 that was organized (but not financed) by the Federal Reserve. Most people wouldn’t have dreamed that Long-Term Capital was too big or too interconnected to fail -- until it threatened to trigger a market meltdown.

There also is the question of honor. If the government indicted SAC or a subsidiary without indicting Cohen, it could come across as spiteful: They couldn’t lay a finger on the man himself, so they destroyed his business instead.

Let’s assume that SAC isn’t too big to prosecute, and the feds go after it. The question no doubt would be raised: Is it fair that Wall Street banks got off for causing the financial crisis, but SAC Capital didn’t, even though it had nothing to do with the financial crisis? SAC’s supporters probably would accuse the Justice Department of setting out to prove that it was unafraid to indict a powerful financial-services firm -- and conveniently chose a hedge fund rather than a huge, well-connected recipient of a taxpayer bailout.

(Jonathan Weil is a columnist for Bloomberg View. Follow him on Twitter.)